As India sets election dates, traders brace for stock rally
Mar 05 2014 , Mumbai
The benchmark BSE Sensex has gained in the month before elections in each of the previous six elections, with the biggest advance coming in 2009 when the Congress-led United Progressive Alliance won a majority.
The gains in the run-up to elections can be explained by a mix of expectations for policy reforms and election spending, according to traders.
Traders expect especially strong gains this year as solid foreign investor flows, a more stable rupee on the back of a narrowing current account deficit are more than offsetting global uncertainties such as the U.S. Federal Reserve's tapering of its monthly bond buying.
Still, although markets widely expect a victory for the main opposition party BJP , whether it can clinch a majority could be the joker in the pack, although similar uncertainties about outcomes in previous elections have not prevented gains.
"A pre-election rally is definitely underway. Flows, positioning, macro are all pointing towards its extension in the coming months," said G. Chokkalingam, founder of Equinomics, a research and fund advisory company.